How to Price Your Cake Decorating Business, Part 2

In yesterdays post, we looked at pricing your business from the perspective of costing the making and decoration of a cake, and remembering to include your time and all related expenses in the overall cost. Now that you know how much it costs to create and deliver your product, it is time to determine how much you will need to charge for it.
This is one of the most difficult parts of starting a cake decorating business. You need to arrive at a point where you charge enough to make a profit and remain viable, but not so much that you price yourself off the market. In a market economy, a product is only worth what people are prepared to pay for it. Having said that, though, it is important that you do not consider price as your selling point. If you want to compete with supermarkets and bakeries and their low cost, mass produced cakes designed for the convenience market, all well and good, but it would be hard to compete with their economies of scale. As a professional providing an individualised, high quality product and service, you can charge – and expect to receive – considerably more than these lower end suppliers.
Where you need to focus your research is on other suppliers like yourself, who discuss each client's individual requirements and design their cakes to order. People who require this level of service expect to pay top dollar for it, and as long as your quality and service are impeccable, it will be you they pay.
It is a good idea to look at catalogues, websites, shop windows, and brochures, to compare styles and quality, and to find out what prices others are charging. Ask people you know who pay for cakes for birthday parties or weddings how much they pay, ring suppliers and ask for quotes, make discreet enquiries when you are a guest at a function – whatever it takes to find a range of prices within which you can set your own.
Armed with this research, you then need to work out how much money you need to make per week. Using the information you already have on costing, you can then work out how many cakes you need to make per week, and how much profit you need to make on each one to achieve your target income.
For example: a cake costs you $20 to make, you can complete 4 per day, and you need to make $100 per day. This means that you need a $25 profit on each cake, giving a total price of $45. If you consider this too high for your market, you will need to revise and lower your costs, or produce and sell more to achieve the weekly income you need.
Most businesses don't make a profit immediately, and in the cake decorating business which relies mainly on word of mouth to build a client base, you must expect to take some time to achieve your desired income. During this initial stage of your enterprise you will be gaining cake decorating and business experience, so that by the time you have a full roster of clients, you will be much better and quicker at the whole process, enabling you to not only produce more, but maybe even to charge more according to your expertise.
Perhaps the most important thing to remember is to not undersell yourself. If you are getting regular customers, you are most likely being recommended by others, which means your product and service are of a high standard. Make sure you charge accordingly.
And if you need a reminder of what you are charging for - check out this You Tube video clip:

Aren't they amazing - and inspiring? If you want to learn how to make them, check out this e-book.

Tomorrow's post will look at customer service – which is of the utmost importance to any business, and is especially so for a personal service based industry like cake decorating.